Aave proposal to freeze alleged Curve founder’s loans draws controversy

A June 12 AAVE (AAVE) proposal aimed toward stopping a specific account from accumulating extra debt has led to controversy, with some individuals arguing that the proposal violates the precept of censorship-resistance or “neutrality” in decentralized finance, or DeFi.

Some individuals imagine that the account is owned by Curve (CRV) founder Michael Egorov. Cointelegraph was not in a position to independently affirm who the account’s proprietor is.

Uhh looks like Curve’s founder has a $110m leverage place towards his $CRV stack throughout all Defi.

If not repaid sooner or later (spoil: it prob gained’t, my man is taking revenue), it will cascade into loads of dangerous debt for lending protocols https://t.co/kxwc0Sk65V pic.twitter.com/yhHp9JFWBV

— vapor (@trading_vapor) June 14, 2023

In line with the proposal’s creator, monetary modeling platform Gauntlet, the Ethereum tackle 0x7a16ff8270133f063aab6c9977183d9e72835428 has amassed $67.7 million value of debt in US Greenback Coin (USDC) and Tether (USDT) by means of the AAVE V2 protocol utilizing $185 million of Curve tokens as collateral.

Gauntlet expressed fears that this account might proceed growing its debt, resulting in the danger that it might be liquidated if there’s a sudden fall within the value of Curve. Compounding the issue in Gauntlet’s view is the truth that CRV has suffered a decline in liquidity over the previous few months. This will trigger slippage if the account will get liquidated, as there is probably not sufficient patrons of CRV within the market keen to tackle such a lot of tokens.

This will result in tens of millions of {dollars} in dangerous debt for AAVE, Gauntlet advised.

AAVE consumer DecentMuse claimed that the pockets tackle “is tagged as belonging to the founding father of Curve,” indicating that it might belong to Egorov. In DecentMuse’s view, the mortgage might characterize a means for the founder to take earnings from his entrepreneurial actions on behalf of Curve. Cointelegraph was not in a position to affirm the identification of the tackle’s proprietor.

Within the proposal, Gauntlet advised that the AAVE decentralized autonomous group (AAVE DAO) ought to implement a patch to freeze any additional makes use of of CRV as collateral for loans. This is able to enable the account to proceed holding its present mortgage place, however would additionally forestall it from accumulating any additional debt.

Associated: Bug in Aave v2 on Polygon causes some property to turn out to be caught in contracts

Some discussion board individuals supported the proposal and criticized the account for piling on a lot debt. For instance, a consumer who goes by the deal with “AAVEBull” reportedly claimed that the account will need to have no intention of paying off its money owed, because it has constantly added to its place because the token has declined in value.

In response, critics of the proposal defended the account. For instance, consumer pray.eth said that the account’s proprietor might merely imagine CRV tokens are radically undervalued; main them to imagine that as the worth declines, it is smart to extend their use as collateral.

Aave-Chan Initiative (ACI) founder Marc Zeller, who’s a frequent participant within the boards, additionally weighed in on the proposal. He said that AAVE DAO ought to be cautious to not violate “the core ethos of DeFi, which is neutrality.” “The intention of customers or what they do with their funds just isn’t our main concern,” Zeller said, including “Customers ought to be free to make the most of the protocol as they see match.”

The proposal is listed as a “advice” as of June 16. Which means it has not but been was a proper AAVE Enchancment Proposal (AIP) that may be voted on by the DAO. The creator has said that turning it into a proper AIP is the proposal’s “subsequent step.”

Members within the blockchain ecosystem proceed to debate the bounds of censorship-resistance. In January, many Bitcoin customers complained of excessive charges attributable to different customers minting and buying and selling Ordinals. Some customers needed to ban ordinals, whereas others noticed a ban as censorship.

On April 11, Tether blacklisted an tackle that had drained $25 million from EVM front-running bots. Polygon co-founder Jaynti Kanani stated the blacklisting established “a foul precedent” that might result in extra transactions being censored, whereas on-chain sleuth ZachXBT claimed that Tether might have been compelled to interact within the act resulting from a courtroom order.

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